As part of our 5 Interesting Learning series we’ve had a chance to do a deep dive on many leaders selling to SMBs in whole or in part, from Zendesk to Smartsheet, from Shopify to Zoom, from Asana to Hubspot, from Box to Dropbox, and so much more.
And there one key take-away: you really should aim for > 100% NRR, even from the smallest of businesses.
Yes, small businesses go under at a much higher rate than enterprises. And yes, there is far less to upsell at most tiny businesses. Traditionally, that has meant even 100% Net Revenue Retention can be tough when 20%-30% of your customers may be out of business in a given year!
Yet we’ve still seen the Best in SaaS can do it. At least 100% ARR after $10m ARR.
Some quick examples:
#1. Smartsheet: 123%+ NRR from all customers, so probably ~110% from SMBs:
#2. Zendesk: 112% NRR overall, with 40% SMB. So probably again around 100% NRR from SMBs.:
#3. Bill.com: 110% NRR from small businesses, and 82% logo retention. And this is from in many cases, very small businesses.
#4. Hubspot: 90% NRR at IPO, 100% today.
#5. Shopify at 100%+ NRR. Shopify doesn’t always break out its NRR, but since its revenue by cohort grows, it’s north of 100%:
#6. BigCommerce at 106% NRR. Shopify’s smaller rival.
#7. Zoom at maybe 110% NRR from SMBs. Zoom’s overall NRR is 130%, with more than half from SMBs. Zoom doesn’t break the difference out but we can input at least 110% NRR from SMBs. Note that is even with half of Zoom’s customers paying monthly!
#8. Upwork at 100% NRR. Even a marketplace like Upwork that can be episodic in usage hits 100% NRR overall.
#9. Xero has 1.1% monthly churn. So it doesn’t quite hit 100% NRR.
#10. Asana has 115% NRR overall, 125% for $5k customers and 140% for $50k customers. So still north of 100% for its SMBs.
We could go on and on. A few thoughts:
- Yes, SMBs churn at a higher rate than enterprises, both gross and net. So plan on that.
- Yes, many SMBs just go out of business. So also plan on that.
- And yes, many top SaaS SMB leaders didn’t have 100% NRR in the early days.
But
- Almost all the top SaaS leaders got to 100%-110% NRR from SMBs. Maybe you can’t quite get there at $1m, $2m, even $10m ARR. But keep getting closer. And try to hit that target after $10m ARR at least.
Make it so!
The post Don’t Settle for Less Than 100% NRR from SMBs appeared first on SaaStr.
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